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Former Advisor Sues Morgan Stanley To Overturn FINRA Award

Christopher Armstrong seeks to reverse a FINRA arbitration win for Morgan Stanley. The wirehouse filed that arbitration to recoup his part of a previous award owed to Charles Schwab.

A former Morgan Stanley advisor, Christopher Armstrong, is suing the wirehouse, hoping to overturn a FINRA judgment that could cost him $2 million.

The suit, filed in New Jersey federal court, is the latest volley in a lengthy legal battle involving Morgan Stanley, Charles Schwab, Armstrong and another former advisor who, in an unrelated legal case, is now serving time on child pornography charges.

The saga began in 2019. New Jersey-based Christopher Armstrong and Florida-based Randall Kiefner, both then financial advisors at Charles Schwab, notified the firm they were quitting to set up a practice at Morgan Stanley.

Schwab immediately accused the duo of soliciting clients to join them in violation of their employment contracts, printing out client lists multiple times and viewing 148 client profiles on a computer screen “in rapid succession,” according to their complaint.

The duo later claimed that Morgan Stanley directors told them their restrictive covenants wouldn’t be a problem, hired attorneys for them, and told them to expect the discount broker to file a restraining order against them.

Schwab did so in April 2019, forcing them to stop contacting clients. Morgan Stanley then fired the pair, and the law firm dropped them.

With the restraining order in place, Schwab went after Morgan Stanley and the advisors in a FINRA arbitration, winning over $7 million. The arbitration panel mandated Morgan Stanley pay $3 million in punitive damages and all three parties collectively to pay the same amount in compensatory damages. At the same time, the FINRA judges said Morgan Stanley would have to pay Armstrong $2.8 million and Kiefner $1.17 million in damages along with hundreds of thousands in attorneys’ fees and revise their Forms U5 to reflect a voluntary departure from the firm without reference to the scandal.

Morgan Stanley then sued the advisors, claiming the wirehouse had covered the advisors’ share of the damages and other fees, totaling more than $4 million. In the court filing, Morgan Stanley said it might not agree with the arbitration panel’s decision but would “fully honor all of its obligations.”

“By refusing to pay their proportionate share of this … award, Armstrong and Kiefner are picking and choosing which portions of the award they like and which ones they will ignore and violate, which is manifestly improper,” the Morgan Stanley filing read.

A separate FINRA arbitration panel agreed in November, demanding Armstrong and Kiefner kick in their portion of the original damages to Morgan Stanley.

Armstrong responded with his lawsuit against Morgan Stanley this week in New Jersey, claiming he is not equally liable as the wirehouse in the dispute and should not have to pay the $2 million.

Kiefner, however, faces more significant issues. In April 2021, Yahoo alerted authorities that he sent emails to himself containing child pornography. Officers questioned him in April of last year, and according to an affidavit, he admitted to viewing the material. He was charged and sentenced to six years in prison.

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